Managing Trade, Reducing Risk &
Adding Value by Taking Advantage of
Free Trade Benefits, Duty-Free
Opportunities & Temporary Import
Schemes
hansonwade
Oil & Gas Supply Chain Conference
Houston, TX
April 27-28, 2016
Kartapurkh S. Khalsa
Senior Counsel & Director of Customs Compliance
National Oilwell Varco
Agenda
• Free Trade Agreements
• Duty Suspension Regimes
• Free Trade Zones/Foreign Trade Zones
• Temporary Import Programs
• Duty Drawback
• Regional Trade Blocs
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Free Trade Agreements
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Free Trade Agreements
• Free Trade Agreements (“FTAs”) are bilateral or multilateral
agreements that reduce trade barriers (import tariffs and quotas)
and increase the trade of goods and services between members
of the trade bloc.
• Good to know, but what does that actually mean?
• It means that you can save money if you have:
– Certain items that originate inside the bloc, and
– Generally, those items must move exclusively within the bloc
– (It’s not quite as easy as it sounds)
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Free Trade Agreements
Can an FTA help me save money?
• It depends
How do I know if an FTA will help me save money?
• Research and number crunching
Free Trade Agreements
• Example 1
-By using the SFTA, I can
save my company
$750,000/year in duties
by hiring two people for
$100,000 to document
the qualification of goods
imported from
Singapore.
• Example 2
- By using NAFTA, I can
save my company
$2,000/year in MPF by
hiring one person for
$50,000 to document the
qualification of
unconditionally duty-free
goods imported from
Mexico.
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Free Trade Agreements
The value of a specific FTA is entirely dependent on your company’s
particular situation.
If you decide that using a specific FTA makes sense, validate your
entries to ensure they continue to qualify.
• Establish a procedure and automate as much of the validation
process as possible.
Make sure that you talk to engineering, procurement,
manufacturing, and operations management regularly.
• You do not want to find out 10 months later that someone
changed a part’s sourcing and now the final product no longer
qualifies for the FTA.
Duty Suspension Regimes
Duty Suspension Regimes
Duty Suspension Regimes are government programs that let an
importer suspend duty and other import taxes on certain items for
a certain period of time.
NOV Rig Systems
Sounds great
what’s the catch?
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You have to keep track of:
•
•
•
•
when the items arrived,
where they are,
what you’re doing with them, and
when they leave
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Duty Suspension Regimes
Many different countries have duty suspension regimes available
• These are generally designed to give a specific local industry
some form of competitive advantage or to promote or protect
specific business sectors
European
Union
Brazil
Free Trade Zones/Foreign Trade Zones
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Free Trade Zones/Foreign Trade Zones
Free Trade Zone (“FTZ”)/Foreign Trade Zone (“FTZ”): an area inside
the physical territory of a country but outside the customs territory
of that country.
FTZs generally allow for the admission, storage, manufacturing,
processing, packing, and export of goods from the physical
territory of a country without the payment of duties.
Wait…so what’s the difference
between an FTZ and an FTZ?
Free Trade Zone
Is what most of the
world calls this
concept.
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Foreign Trade Zone
Is what the U.S. calls
this concept.
Just say “FTZ” and
nobody will notice if
you accidentally think
the wrong term!
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Free Trade Zones/Foreign Trade Zones
FTZs require careful management of inventory:
• What comes in,
• What goes out,
• What waste is produced,
• Who has access to the goods in the Zone,
• How long goods have been in the Zone,
• Where the goods are inside the Zone,
• Physical security requirements,
• Etc.
FTZs can provide excellent cost savings if used correctly.
Temporary Imports
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Temporary Imports
Temporary Imports are imports of material that will be exported
from the customs territory of the host country within a certain
time period.
In most cases:
• Goods must be exported within a strict time limit,
• Goods are restricted in how they can be used, and
• Everything that is imported must be exported or destroyed
(including scrap).
Duty Drawbacks
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Duty Drawback
Drawback is a program that allows importers to either recover
previously paid import duties or suspend payment of duties, as
long as the goods subject to those duties are later exported.
Duty Drawback
Example 1
United States: Goods are
entered into and $100 is paid in
duties. Upon export, the
importer files a drawback claim
and receives a $99 refund (the
U.S. drawback program allows
for the recovery of 99% of
duties paid for goods).
Example 2
Brazil: Raw materials, components, or
goods used in the production of a
finished item are entered under an
approved drawback scheme. Duty
payment is suspended for an approved
period of time. All imported goods and
the finished items must be exported
within that period of time or duties
become due.
Source: Calibri 10pt regular with manual bold applied.
Source citations are right aligned and wrap up the slide from the bottom.
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Regional Trade Blocs
EU
European Union: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark,
Estonia, Finland, France, Germany, Greece, Hungary, Italy, Ireland, Latvia, Lithuania,
Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Spain, Slovakia,
Slovenia, Sweden, United Kingdom
EAUC
Eurasian Customs Union: Russia, Belarus, Kazakhstan
GCC
Cooperation Council for the Arab States of the Gulf (“Gulf Cooperation Council”): Bahrain
Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates
Mercosul/Mercosur: Argentina, Brazil, Paraguay, Uruguay, Venezuela
ASEAN
Association of Southeast Asian Nations: Brunei, Cambodia, Indonesia, Laos, Malaysia,
Myanmar, Philippines, Singapore, Thailand, Vietnam
Future Regional Trade Blocs
TPP – Trans-Pacific Partnership: Singapore, Brunei,
New Zealand, Chile, United States, Australia, Peru,
Vietnam, Malaysia, Mexico, Canada, Japan
RCEP – Regional Comprehensive Economic
Partnership: Indonesia, Malaysia, Philippines,
Singapore, Thailand, Brunei, Vietnam, Laos,
Myanmar, Cambodia, China, Japan, South Korea,
India, Australia, New Zealand
TTIP – Transatlantic Trade and Investment Partnership:
European Union, United States
Questions?
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